Gold Stocks Remain A Key Focus Heading Into The Weekend
This week saw markets and gold prices drop once again. In fact, gold prices have dropped to some of their lowest since November. But something to keep in mind that the high this year is right around $1,704.30 for gold.
This month, despite the dip, gold has continued to defend its previous “support/resistance” level of $1,450. It came close to testing the level on March 16th but managed to tick slightly above, at $1,450.90. For all intents and purposes, gold tested its historic pivot.
Read More: Now Is The Time To Buy Junior Gold Stocks
So what does this mean? Should we be scared of gold stocks right now in light of this? To the contrary, many are starting to become even more bullish. This includes company insiders as well. If you sift through some of the public filings, you will see that key leadership is buying right now. Equinox Gold (EQX-Stock Report) Hudbay Minerals (HBM-Stock Report) and even Osisko Gold (OR-Stock Report) have all seen insider buying this month. Keep in mind that every one of these companies declined in the market against the backdrop of the coronavirus.
What’s Next For Gold?
There are so many indicators that support a bullish case for gold. But as many have already said, I don’t think anyone expected some of the top gold stocks like Barrick Gold (GOLD-Stock Report) to drop so far, so quickly. But while we should all expect continued volatility, the current conditions for a higher gold price could still be in force.
The precious metal is used as a safe-haven when we see economic uncertainty. The coronavirus is just one – albeit large – example of global economic turmoil. It’s so big that the U.S. is working on a multi-trillion program to support an unforeseen fall-out. I say unforeseen because we really have no idea how farreaching this will become after the dust settles.
Meanwhile, other countries are following suit. A global cash crisis could see governments literally printing money to meet the demand to deflect an all-out depression. This could be another big benefit to gold prices as those holding diluted cash would want to hedge and protect wealth using gold as that safe-haven. Though gold doesn’t provide a yield, rates are so low that the opportunity cost of owning gold instead of financial instruments could also boost demand.
Are Junior Gold Stocks Best?
Now, we’ve talked a lot about junior gold stocks being a focus during gold rallies. And while these are higher risk, they can also become high-reward situations as well. Take Wheaton Precious Metals (WPM-Stock Report) for instance. The gold stock was trading under $3 a share in October of 2008, just as the last gold bull market began.
Over the course of the breakout period, Wheaton managed to run well-beyond $47 a share. During that same time, Newmont recorded a gain of 237%. While multiple triple-digit gains are amazing, the fact that Wheaton produced quadruple-digit gains shouldn’t be ignored. It all came down to timing and execution.
In line with this thought process, we’ve also discussed IMC International Mining (IMIMF-Stock Report)(IMCX) very recently on this site. The company not only announced a new acquisition, it also reported today that it will host a conference call with GoldStocks.com to talk about the details of it. As far as the recent transaction goes, IMC International acquired Thane Minerals and its Cathedral property in a multi-million dollar deal. There are other riders that go along with future performance. This includes additional milestone payments should additional exploration programs determine a resource calculation of at least 800,000,000lbs of copper-equivalent within the Cathedral Project area.
The northern part of the Quesnel Terrane extends from south of the Mt. Milligan Mine northward to the Kemess Mine, with the Cathedral property located midway between these two copper-gold porphyry deposits. Why should this matter? The Mount Milligan copper-gold porphyry deposit contains a combined Measured and Indicated Mineral Resource of 243.9 million tons at 0.134% Cu and 0.226 grams per ton (g/t) of gold, containing 717.7 million pounds of copper and 1,769,000 ounces of gold.
Additionally, the Kemess Mine produced approximately 3 million ounces of gold and 700 million pounds of copper over the life of the mine. Based on the untapped potential and location of Cathedral, this could be a favorable situation for IMC International.
Is It Time To Buy Gold Stocks?
The ultimate question with so much blood in the streets: Is it time to buy gold stocks? Now, I’ll be the first to say that the decision to buy or sell is 1,000,000% up to you. If you look at a chart for gold prices, you’ll see a few things from a technical perspective:
From top to bottom: First, Gold prices have trended around the 200-day moving average (DMA). While the price has broken below this level, it may have just turned the 200DMA into a new trend line for now. Next, we look at the MACD, which is a momentum oscillator that can show the relationship between moving averages and the price.
For lack of getting into a full lesson on MACD, the current set up indicates that there could be potential for a reversal. As you’ll see the red histogram lines, they have begun to curl back north, which is generally a more bullish case. Finally, the last indicator, the RSI shows that the price of gold could be trending in deep “oversold” territory right now. Typically at or below 20 is regarded as an extremely oversold situation.
Now, can it go lower? That’s a big “yes”. However, the interim technical indicators could also make the case for a potential turnaround for gold. A lot of this will depend on economic moves to address the coronavirus as well. I say this because using technicals alone might limit your entire view on the market in general. Especially with things like gold and even oil, economic shifts can put a wrench in your plan depending on what happened. Keep that in mind heading into next week.
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